India: Anti-Money Laundering Laws In India : A Brief Overview

The literal meaning of laundering is washing or cleaning dirty
clothes.

The term Money Laundering is used for cleaning dirty money. It
is the disguising or concealing of illicit income in order to make
it appear legitimate.

Money Laundering is being employed by launderers worldwide to
conceal criminal activity associated with it such as drugs / arms
trafficking, terrorism and extortion.

Article 1 of EC Directive on Prevention of the use of the
Financial System for the Purpose of Money Laundering, 1991 defines
the term 'money laundering' as "the conversion of
property, knowing that such property is derived from serious crime,
for the purpose of concealing or disguising the illicit origin of
the property or of assisting any person who is involved in
committing such an offence or offences to evade the legal
consequences of his action, and the concealment or disguise of the
true nature, source, location, disposition, movement, rights with
respect to, or ownership of property, knowing that such property is
derived from serious crime".

The Financial Action Task Force on Money Laundering (FATF) an
intergovernmental body established by the G-7 Summit in Paris in
1989 and responsible for setting global standards on anti-money
laundering and combating financing of terrorism defines money
laundering as the processing of criminal proceeds to disguise their
illegal origin in order to "legitimize" the ill-gotten
gains of crime."

India became the 34th country member of the Financial Action
Task Force in 2010 . India is also a signatory to various United
Nations Conventions which deal with anti money laundering and
countering financing of terrorism.

India has criminalised money laundering under both the
Prevention of Money Laundering Act, 2002 (PMLA), as amended in 2005
and 2009, and the Narcotic Drugs and Psychotropic Substances Act,
1985 (NDPS Act), as amended in 2001.

In India, before the enactment of the Prevention of Money
Laundering Act 2002, a number of statutes addressed scantily the
issue in question. These statutes were The Conservation of
Foreign Exchange and Prevention of Smuggling Activities Act,
1974,The Income Tax Act, 1961,The Benami Transactions (Prohibition)
Act, 1988,The Indian Penal Code and Code of Criminal Procedure,
1973,The Narcotic Drugs and Psychotropic Substances Act, 1985, The
Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic
Substances Act, 1988.

The Prevention of Money Laundering Act 2002 is sought to be
further amended by the The Prevention of Money Laundering
(Amendment) Bill, 2011 hereinafter referred to as the
'Bill', which has been introduced by the Minister of
Finance, Mr. Pranab Mukherjee in the Lok Sabha on December 27,
2011.

The Bill proposes to introduce the concept of 'corresponding
law' to link the provisions of Indian law with the laws of
foreign countries. It also adds the concept of 'reporting
entity' which would include a banking company, financial
institution, intermediary or a person carrying on a designated
business or profession. The Bill expands the definition of offence
under money laundering to include activities like concealment,
acquisition, possession and use of proceeds of crime.

The Prevention of Money Laundering Act, 2002 levies a fine up to
Rupees five lakhs. The Bill proposes to remove this upper limit of
fine.

The Bill seeks to provide for provisional attachment and
confiscation of property of any person for a period not exceeding
180 days if the authority has reason to believe that the offense of
money laundering has taken place. The Bill proposes to confer
powers upon the Director to call for records of transactions or any
additional information that may be required for the purposes of
investigation. The Director may also make inquiries for
non-compliance of the obligations of the reporting entities. The
Bill seeks to make the reporting entity, its designated directors
on the Board and employees responsible for omissions or commissions
in relation to the reporting obligations. The Bill states that in
the proceedings relating to money laundering, the funds shall be
presumed to be involved in the offence, unless proven otherwise.
The Bill proposes to provide for appeal against the orders of the
Appellate Tribunal directly to the Supreme Court within 60 days
from the communication of the decision or order of the Appellate
Tribunal. The Bill seeks to provide for the process of transfer of
cases of the Scheduled offences pending in a court which had taken
cognizance of the offence to the Special Court for trial. In
addition, on receiving such cases, the Special Court shall proceed
to deal with it from the stage at which it was committed. The Bill
also proposes to bring all the offences mentioned under Part A of
its Schedule to ensure that the monetary thresholds do not apply to
the offence of money laundering.

Money Laundering is a global menace that cannot be contained by
any nation alone. The Prevention of Money Laundering (Amendment)
Bill 2011 was necessitated in view of India being an important
member of the Financial Action Task Force and to bring prevention
of money laundering legislation on par with global norms. The said
Bill is still pending for approval in the Parliament.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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India’s 2015 Union Budget is out. The Modi-led Government has announced policy measures that are bold, decisive and pragmatic- clearly, a major step in the right direction for achieving a projected 8.5% growth rate in 2015-16.

India’s 2015 Union Budget is out. The Modi-led Government has announced policy measures that are bold, decisive and pragmatic- clearly, a major step in the right direction for achieving a projected 8.5% growth rate in 2015-16.

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